Genting Invests $200M in MGM Mirage; A Prelude?

Genting's investments were made during MGM Mirage's recent $2.5-billion capital raise, which included a $1-billion common stock offering and a $1.5-billion notes offering. The partnership talks are in the preliminary stage, according to the source.

"This has great potential to be a very powerful alliance," he says.

Genting has long wanted to be in the gaming business in Macau, according to published reports, and a partnership would give Genting that access while giving MGM access to other Asian markets where Genting has a foothold. Last month, New Jersey gaming regulators ordered MGM to "disengage" itself from business dealings in Macau with Pansy Ho, saying the daughter of Macau's richest man, multi-billionaire Stanley Ho, is not a suitable partner.

Majority controlled by billionaire Kirk Kerkorian, MGM Mirage is currently dealing with about $14 billion of debt, much of it related to its CityCenter development, which is scheduled to open late this year. The common stock and note offerings are being used to improve the company's balance sheet; asset sales and partnerships also are on the table. The company this week concluded a tender offer for approximately $1.04 billion senior notes due later with 85% participation by dollar value.

Genting used the offerings to acquire a 3.2% of MGM Mirage's common stock. Its Resorts World Limited subsidiary invested an additional $50 million on the notes offering, according to Genting's web site, picking up $25 million of the 10.375% notes due May 2014 and $25 million of the 11.125% notes due November 2017. Resorts World or another Genting subsidiary acquired another $50 million of the notes, according to reports.

Kerkorian's Tracinda Corp. also made a significant purchase during the offerings, acquiring a little more than 14 million shares of common stock to soften the dilution of its interest, which was 53.8% prior to the offering. Tracinda's purchase of 10% of the offering gave it 163.3 million shares but the offering expanded the shares outstanding by nearly 50% to 419.5 million shares, leaving Kerkorian with a 39% stake.